SASK. INCREASING CROP INSURANCE COVERAGE.
Fresh food pilot to expand into Sask.
TORONTO — Canada’s biggest food and pharmacy retailer is keeping a watchful eye on potential consumer pushback from rising food costs, the downside of a weakening loonie.
Loblaw, which reported Thursday profit more than doubled in the fourth quarter due largely to the acquisition of Shoppers Drug Mart, spent all of 2013 and early 2014 locked in a pricing battle with Walmart, which has been expanding its grocery footprint across Canada.
The pricing effects were mitigated somewhat by food price inflation across all grocery retailers in 2014, and led to some welcome same-store sales increases at Loblaw.
“Inflation is generally a positive for the industry, (and) that has contributed to a reasonable amount of robust sales growth for all of us over the course of 2014,” chief executive Galen Weston told analysts on a conference call.
“With the decline in the Canadian dollar we expect that to continue into 2015. I think that is a positive. However, the changes have been pretty significant (and) we are watching this very carefully to see the extent to which the consumer begins to resist (inflation) passthrough. At this stage, we don’t see anything that is causing us concern, but it is something we are thinking carefully about.”
Consumers may be sheltered from food price increases thanks to the plunge in gasoline prices. Statistics Canada said Thursday that gas prices dropped 26.9 per cent in January from a year earlier, compared with a 16.6 per cent annual decline in December. Food prices were up 4.6 per cent last month, according to StatsCan.
Since buying Shoppers, Brampton Ontario-based Loblaw has introduced its housebranded packaged products into the drug chain’s stores, and will expand a fresh food pilot from a handful of the drug chain’s stores in Ontario into Saskatchewan.
Loblaw also said it will expand its Joe Fresh clothing line into 50 more Loblaw stores by the end of this year.
For the fourth quarter, Loblaw earned $247 million, or 60 cents per share in the 13week period ended Jan. 3, up from $114 million (41 cents) in the same quarter a year earlier. Adjusted earnings climbed to $396 million or 96 cents per share from $161 million (57 cents) a year ago, according to Thomson Reuters.
Revenue climbed to $11.4 billion, which included about $3 billion from Shoppers, up from $7.6 billion a year earlier. Same-store sales at Loblaw, a key retail metric, rose 2.4 per cent excluding gas, and rose 3.3 per cent in the core grocery segment. Shoppers Drug Mart’s same-store sales rose 3.8 per cent overall with a same-store gain of 4.2 per cent in the pharmacy and a rise of 3.6 per cent in the front of the store.
Loblaw also lost $14 million in the quarter as a result of divesting 11 Shoppers Drug Mart stores, sold as part of the retailer’s agreement with Canada’s Competition Bureau.
Loblaw also realized $49 million in synergies in the quarter related to improved cost of goods sold and purchasing efficiencies arising from the Shoppers purchase.